News

Well into an excruciating bear market, it's possible to confidently predict a bright future for one part of the investment industry.

That would be exchange-traded funds, or ETFs. These index funds that trade like a stock are attracting attention not only from individual investors, but also from big financial players.

Bank of Montreal and the mutual fund company Invesco Trimark have filed papers with regulators to introduce ETFs in the Canadian market. In the United States, the brokerage firm Charles Schwab and a respected mutual fund company called Pimco have also filed plans to issue ETFs.

Care to educate yourself about this sensible, low-cost alternative to buying mutual funds or choosing individual stocks? What follows is a self-study guide for ETFs using investing websites that will help you learn the basics and find your way through the hundreds of different choices out there.

Introduction to ETFs

Investored.ca: Funded by the Ontario Securities Commission, the Investor Education Fund is a great source of unbiased information on investment topics. The website's ETF section – just type “ETF” into the search box – is the ideal neophyte's common sense guide to these securities. Sample wisdom: “Remember: ETFs can be a simple way to get a good mix of investments.”

Investopedia.com: As the name suggests, this site is an online investing encyclopedia. Run a search on ETFs and you get close two dozen articles, including a useful overview that explains: “An ETF trades like a stock on a stock exchange and looks like a mutual fund. Its performance tracks an underlying index, which the ETF is designed to replicate.”

The Motley Fool (fool.com): This online investing community – investors writing for investors – has been around since 1993, which in Internet years means it's been around since the Stone Age. You'll find the ETF section under the Investing tab. Be sure to read the 60-Second Guide to ETFs, which offers a light, bright and tight run through all of the main ETF attributes, including their low fees and utility for building diversified portfolios.

When You're Ready to Invest

Globeinvestor.com: Quotes, charts and other data for the 104 TSX-listed ETFs, plus the 708 listed on the New York Stock Exchange and another 48 traded on Nasdaq.

Bylo.org: A do-it-yourself investing advocate known as Bylo Selhi maintains this site, and the emphasis is on index funds and ETFs. You'll find a helpful list of links to the websites of the Canadian and U.S. companies offering ETFs, as well as to a web page with a complete inventory of ETFs listed on the Toronto Stock Exchange. If you want to better understand the indexes that ETFs track, this site has links for them as well.

Google Finance and Yahoo Finance: Let's say you wanted to see what the word is on one of the best bargains in the entire investing world, the Vanguard Total Stock Market ETF VTI-A, with a management expense ratio of 0.07 per cent (a comparable U.S. equity fund would have an MER of 2.58 per cent on average). These two financial sites aggregate articles and blog posts on particular stocks and ETFs from all over the Internet. Just type in the symbol: VTI, in this case.

FinancialWebring.org: An online discussion forum that includes a section titled Funds and ETFs.

It's a good place to go if you want to see investors toss around questions like where an ETF newbie can go for help in picking the right stock indexes to buy into.

SeekingAlpha.com: This outstanding website posts a steady stream of articles from top blogs, newsletters and money managers. The ETF area is worth a look whether you're new to these products or you've been using them for years. Articles are categorized under such headings as new ETFs, specialty and broad-market ETFs and portfolio building with ETFs.

morningstar.ca: The Canadian branch of this independent fund and stock analysis firm doesn't have a dedicated ETF section yet, but its Fund Watch section has lately contained quite a few articles on what's new and interesting in the Canadian ETF sector. One recent article noted BMO's plan to launch seven ETFs, including one that will track the Dow Jones industrial average DJIA-I and another focusing on emerging markets. Those are two niches that have not yet been covered by existing Canadian-listed ETFs.

Larry MacDonald's Investment Ideas blog on Canadian Business website : New developments in the ETF market often rate a mention here.

Canadian Capitalist blog : This investing and personal finance blog includes ETFs among the subcategories it uses to organize its posts.

ETF Master ClassIndexUniverse.com : A site devoted to the belief that it's better to invest in indexes than try to choose individual stocks and bonds, as conventional mutual funds do. One of the highlights is a daily roundup of the best ETF articles appearing in the media.

Morningstar.com : The U.S. Morningstar site devotes a lot of coverage to ETFs and is well worth reading for opinionated takes on issues like whether leveraged and inverse ETFs are worthwhile (leveraged ETFs give you two or three times the move of an underlying index, while inverse ETFs allow you to profit from falling markets). The Morningstar take on these controversial ETFs can be seen in this headline: “Warning: Leveraged and Inverse ETFs Kill Portfolios.”

ETFTrends.com : The proprietor of this site, money manager Tom Lydon, is turning up all over the place these days as an expert on ETFs. Here, he and other writers provide commentary that places ETFs in the context of what's going on in financial markets and the wider world. Recent sample article: “How Obama's Defence Plans Could Affect ETFs.”

ETFGuide.com : A source of information about developments in the ETF industry, and on ETF investing. A recent article looked at the five lowest-cost ETFs in the U.S. marketplace for the major asset categories.